oil - latest news... more rises predicted

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    Oil struck a high near $US71 on Tuesday as oil companies raced to check their abandoned oil platforms and refineries for damage after Hurricane Katrina's rampage through the Gulf of Mexico.

    US crude hit a record $US70.85 a barrel before settling at $US69.81, up $US2.61 a barrel, amid reports of drifting oil rigs and flooded refineries.

    The storm, which killed at up to 80 people, shut nearly all of the Gulf of Mexico's oil production - about a quarter of US oil output - and closed down nine refineries along the coast, according to Government figures.

    Energy analysts said oil prices could soar as high as $US80 a barrel if damage reports from oil companies bear bad news.

    "It's not out of the question that $US80 could be the next barrier if there's long-term damage," Gerard Burg, a minerals and energy economist at National Australia Bank, said.

    The last time oil prices, adjusted for inflation, averaged $US80 a barrel was 1980, after the Iranian revolution.

    "Fasten your seatbelt, peak hurricane season isn't until mid-September through mid-October, and we've had two hurricanes hit the Gulf Coast already," Deborah White, a senior energy analyst at SG Commodities in Paris, said.

    OPEC's biggest crude oil producer, Saudi Arabia, moved swiftly to pledge an extra 1.5 million barrels per day (BPD) of oil to the market if needed and the United States said it would dip into its strategic reserves if necessary.

    The Paris-based International Energy Agency (IEA) says it could release crude or fuel from its emergency reserves if the impact of Katrina causes a severe crunch.

    "Nothing can be decided at this moment until a full assessment of the damage has been made," an IEA spokesman said.

    Royal Dutch Shell says an aerial inspection of its giant Mars oil platform indicated some damage to its upper deck. Two of the company's drilling rigs were adrift.

    The storm also forced nine refineries in Louisiana and Mississippi to shut down and four others to reduce operations, disabling more than 10 per cent of US refining capacity.

    Several drilling companies, including Ensco, Transocean and Noble reported rigs adrift after the storm.

    "Drifting rigs are an ominous sign for an already panicky market since moorings and anchors can potentially be dragged by drifting facilities and do damage to sub-sea pipes," analysts at JP Morgan said.

    The United States maintains a small Government heating oil stockpile in the north-east, but otherwise has limited ability to quickly meet sudden fuel shortfalls.

    -Reuters

    Dave R.
 
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